Onebornfree's Financial Safety Reports : Bill Bonner

Showing posts with label Bill Bonner. Show all posts

Monday, November 18, 2013

Bill Bonner: "Repeat After Me: Economics Is NOT a Science"

[Financial Safety Services commentary: more accurately economics is a science, however, it is strictly a social science, not a physical science like chemistry or physics, as the Austrian economist Ludwig Von Mises clearly and succinctly explained in his classic "The Ultimate Foundation of Economic Science". I personally feel that for savers, investors and speculators, the most important ramification of this particular realization is that because economics was not, is not and can never be included in the "hard science" category along with physics and chemistry, it can in no way be a reliably predictive "science", as are those "hard sciences". Which means that the social science of economics can in no way accurately, consistently predict the economic future, as many economists, and many "investment advisors" would have you believe it can. This great article by Bill Bonner goes a long way towards explaining, in simple, none-technical terms for you, the realities of this economic "science". Regards, Onebornfree & Financial Safety Services.]
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Bill Bonner

"On Monday and Tuesday, we visited our youngest son, Edward, a sophomore at the University of Vermont. His roommate joined us for dinner.

“Okay, let me explain it to you,” we said.

The roommate was wondering if he should switch his major to economics.

“Economics is a phony science. The more you study it, the more you think you know… and the less you really know about how an economy actually functions.

“I’ll explain why in just a few sentences.

“If you are a real scientist, you start with things you can know… and you can build on them.

“Water boils at 212 degrees Fahrenheit at sea level, for example. The molecules heat up… then suddenly change from liquid to gas… and the pot boils. Right? Happens every time. You can count on it. And with this knowledge, you can build a steam engine.

“So, the simpleminded economist comes along and says, ‘Hey, an economy is like a pot of water! You heat it up… you get more activity… and GDP grows.’

“The analogy holds up superficially. You heat up the economy by putting some fire under it. If you’re a central banker, you lower interest rates. If you’re a politician, you increase the deficit.

“You know there’s a risk of overheating… or causing a bubble. But you think you understand how it works. You think you can predict and control the outcome because you’re a scientist who uses mathematical models, just like a real engineer.

Nobody Knows Anything

“But the problem is you don’t know anything. You don’t know if an economy really is like water. You don’t know where sea level is. For all you know, you’re high in the Alps. And you don’t know whether the fuel you’re using adds to the fire… or subtracts from it. QE, for example, may help heat up the economy. Or it may not. No one knows for sure.

“And get this. All those little molecules, you know – those individuals in the great economic pool? As soon as they catch on to what you’re doing, they will change their behavior. That’s the big difference between water and people. Water does the same thing no matter what you say or what you think. People don’t.

“We talk about the economy being like water. Well, try to imagine the contrary. Imagine water as though it was like a real economy. Imagine that the water knew you were going to bring it to a boil. Then instead of turning into vapor at 212 degrees, it might boil at 100 degrees or 170 degrees or 50 degrees in anticipation.

“And then, after you’ve brought it to a boil a few times, the water gets sick of being manipulated like this… and it boils off if it even suspects you’re thinking of warming it up.”

The kid started to fidget and look away. He was afraid he had run into some cranky old nut job who was going to keep talking all morning.

“Well, I guess I’ll stick with engineering.”

“Good idea.”

Regards, Bill
Original article source

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Monday, July 1, 2013

Are We All "Fking Fked!" ?

Click on image to enlarge
[Financial Safety Services commentary: Here's Bill Bonner to prove to us all that economics and investment articles do not have to be dry and humorless Heck, they can even be "x-rated" and still profound, in the right hands. On the other hand, despite what is revealed in my graph above this commentary which dramatically illustrates what the Federal Reserve has been up to for the past few years, it does not mean that his dire prediction will necessarily come true, or, at the very least, it does not have to come true for you. Financial Safety Services main goal is to show individuals how to protect their precious long term savings from the type of shenanigans outlined by my graph and by Mr Bonner's text- and even how to safely speculate with money you can afford to lose -should you be lucky enough to have any "play money" in these troubled times. Bottom line: you do not have to be F**king F**ked . Enjoy! ]

Bill Bonner

"Neil Barofsky, the federal employee in charge of auditing the TARP program, says the "U.S. is pretty f**ked." The Huffington Post reports that he is not the first to resort to the F-word to describe Americans' situation:

Christina Romer... the former chair of President Obama's Council of Economic Advisers, told Bill Maher last year that the U.S. was "pretty darned f**ked" on the night that Standard and Poor's downgraded the country's credit rating.   Another Washington official known for his testy language? None other than Tim "I have been the most f**king transparent secretary of the Treasury in this country's entire f**king history!" Geithner.

Yesterday, we found out that whatever it takes to bring about a real f**king recovery... with real f**king growth... and real f**king prosperity... central banks don't have it.

All they have is the ability to manipulate the credit market... and print more money. If that's all it took to make people wealthy, Zimbabweans would be the wealthiest f**king people on Earth, followed by the f**king Argentines.

And now we discover that, despite f**king Herculean efforts on the part of central bankers, more and more of the world economy is nevertheless still f**ked.

Central banks doubled their f**king assets (and the foundation of the world's money supply) in just four short years. The Bank of England was particularly energetic. It tripled its f**king assets. But the recession in Britain continues. And in the U.S., another f**king recession may be here already. If not, it's probably right around the f**king corner.

McDonald's sales are at a two-year low. If you can't afford a f**king Big Mac, what can you afford? Economist David Rosenberg, at Gluskin Sheff, says export orders are collapsing too. The last two times this happened, we were in a f**king recession. From Bloomberg:

Exports appear to be collapsing around the world. Data out of Germany this morning showed exports falling 1.9%, and South Korea, the canary in the coal mine, has seen exports crumble.

Now, Gluskin Sheff's David Rosenberg writes that soon we'll find "that the U.S. prints a negative-GDP reading on the back of a negative export shock that does not appear to be in any forecast."
He writes that 70% of real GDP growth since the "recovery" began three years ago has come from export volumes and inventory investment.

In fact, Rosenberg points out that there is an 81% correlation between annual growth in U.S. exports and ISM new orders, and that this level of new export orders coincided with the last two recessions.
And yesterday came the official announcement that France, too, is in a f**king recession.

"France is f**ked," said a friend at dinner last night.

"Everything is rigged... and re-rigged. France's Socialist president, Francois Hollande, is a rich man. He has three houses on the Cote d'Azur. But he claims to hate the rich. And gets votes by promising to punish rich people with higher taxes.

"They're already doubling the wealth tax. And now they're putting the income tax up to 75%. Of course, it doesn't really matter. It applies only to people earning more than a million a year. And hardly anybody earns that kind of money in France. If you're going to earn that much, you go somewhere else.
"So they say it's mostly symbolic. But symbolic of what? It's a symbol of a stupid, hypocritical government... that pretends that it can treat people who create wealth as though they were milk cows. It squeezes them dry... and then kicks them in the ass.

"And you know what? I can do something symbolic too. I can leave France."

Which is why France is f**ked. People with any gumption leave. They can move to London. They can move to Geneva. They can move to Brussels. They can live well in any of those cities.
Another guest at last night's dinner party was a farmer:

"I went to a meeting hosted by our regional farm bureau last week. They were explaining to us all of the wonderful things they are doing for us. They had a PowerPoint presentation... with great photos of them at work... showing all of the resources we had to work with.

"What they didn't bother to talk about was how costly all of their 'help' has become. In Europe, there are now five bureaucrats working in some area of agricultural administration for every one farmer. And these people increase a farmer's workload. Now I spend half of my time filling out the forms that these people require... or being inspected... or complying with some new rule or regulation.

"So when they got to the end of the presentation, they asked if there were any questions. I stood up. I said, 'I'd like to make a proposal. Since there are now five administrative people in the agricultural sector for every farmer... and since every farmer must spend half of his time dealing with the admin people... I propose that each farmer be given one paper pusher to work for him exclusively. That paper pusher's job will be to push the papers back to the other paper pushers.

"'You can plainly see the advantage of such a system. It will cost nothing. No jobs will be lost. And it will free farmers from doing things that aren't productive. In theory, it should double a farmer's productivity. So everyone will be better off.'

"The guy from the farm bureau just muttered something, and then they closed the meeting."
Our friend did not say so. But farmers are f**ked by the f**king farm bureaucracy.

But so what? We're all f**ked, because whatever the f**king central bankers have got, it ain't f**king enough to bring about real f**king growth in the real f**king economy.

And as we saw yesterday, the central bankers and central planners are the ones who f**ked up the economy in the first place. And now the only thing that would bring real growth is the very thing they refuse to do: Stop f**king with it!"

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Financial Safety Services is a private , mostly off-line, international, person to person consulting service that attempts to show its real-time [i.e. non-internet derived] clients how to speculate safely with money that they can afford to lose. Money that the client cannot afford to lose should never be risked in these speculations

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Friday, June 7, 2013

Man [and the Economy] Is _Not_ a Machine!- Bill Bonner

[Onebornfree/Financial Safety Services commentary: this might be a very important article for you, dear reader! Mr Bonner points out what you'd think is obvious, and yet, outside of Austrian economic theory, almost the entire field of economics and associated professions [e.g. banking, investment consulting, financial advisory services, money management etc.] is in fact based on the exact opposite assumption, [i.e. the overtly mechanistic, "scientific""Economic Man" assumption ] ; that is, that we are not all totally unique individuals with unique tastes and values etc. that constantly change, but that we are all in fact essentially alike, with more or less similar likes, dislikes, life-goals goals etc etc. ,and that "therefor", the broad mass of individuals actions can be safely predicted ahead of time for any given economic scenario by a bunch of "trained" professionals [read "seers"] who can consult their charts, then look down their noses into the future and make grandiose "certain" assumptions about how you and almost everybody else will be acting next week, next year, or the next decade, and how those actions will influence the economy overall. Of course, this moronic, economic man model has been shown to entirely false by economists such as Karl Menger, Ludwig Von Mises, and Murray Rothbard, and as a result, the undying pomposity and self -assuredness of the many "seers" who make their living "predicting" future economic events [e.g. this man], and who constantly pontificate/bloviate about "stimulating the economy" etc. has been repeatedly exposed; and yet so far, still, despite these "seers" obvious almost complete failure in consistently predicting future economic events, to no avail - most people would apparently still rather continue to believe this broad mass of economic and investment "seers" and bloviators etc. Sad but true. Question: Are you going to continue to believe the bloviators and their "economic predictions"? Regards, onebornfree.]

Bill Bonner

"Yesterday, the markets reversed direction, albeit timidly. The Dow fell 19 points. Gold rose $19 per ounce.

And if there is anyone who knows what these markets will do tomorrow, he doesn't work at the Diary of a Rogue Economist.

The Rise of the Technicians

Before coming to California and Mississippi, we gave a speech in London. In it we quoted economist Paul Krugman. Here's the quote, from an article in The New York Times:

Keynesian economics rests fundamentally on the proposition that macroeconomics isn't a morality play – that depressions are essentially a technical malfunction. As the Great Depression deepened, Keynes famously declared that "we have magneto trouble" – i.e., the economy's troubles were like those of a car with a small but critical problem in its electrical system, and the job of the economist is to figure out how to repair that technical problem.

What kind of brain could think such a thing? How could you confuse an economy with a machine? We promise not to become earnest about it, but it is probably worth spending a few minutes exploring this claptrap.

It is the fatal flaw at the heart of modern economics. It also happens to be the foundation of the Fed's attempt to revive the economy. Krugman, Bernanke, Summers et al. think they are technicians...

They've got the wrong metaphor. You may be able to describe the human body as a machine too. But don't try to fix it with an adjustable wrench. It's a good thing Paul Krugman isn't a medical doctor!

Unlike a machine, an economy was neither designed by anyone nor built in a factory. There are no plans... no owner's manual... no guide to troubleshooting problems... and no website where owners go to talk about the problems they've had and the tricks they've used to fix them.

Not made by man... it cannot be repaired by man. But let's look at why this is so.

The Economy Is Not a Machine

First, an economy is a "complex adaptive system." It has lots of moving parts, in other words, and each of these parts has information and desires of its own.

The farmer in Mississippi may know that his bottom 40 acres are too wet to plow. The Department of Agriculture has no idea. The plumber in Milwaukee may know that his business is slowing down. But how would Krugman know?

What machine has intelligent parts... each responding to its own information base, more or less independently?

Second... and perhaps more importantly... the parts have desires of their own. You build a machine to accomplish the desires of the designer. An economy, on the other hand, is merely a way for the constituent parts to achieve their own ends.

Imagine an automobile that goes where the steering wheel wants to go! Imagine a motor that runs faster when the carburetor feels frisky... and slows down when the valves get tired.

You can see that this is like no machine ever created. The parts want to go in different directions... at different speeds... for different reasons. The economy is much more like a flock of birds than a Boeing 747.

In today's America, real (inflation-adjusted) wages are lower today than they were 10 years ago. Depending on how you adjust for inflation, they may be as low as they were at the end of the second Eisenhower administration.

With so little in earnings, people are naturally careful with their money. They go to giant discount shops... in order to get as much for their money as possible. They want low prices.

What is an economy for, if not to satisfy the hopes and desires of the people who live in it? And what is the goal of activist economics, if not to help people get what they want?

So what does Paul Krugman do?

He urges the government to raise consumer prices – to consciously and intentionally sabotage the wishes of the people by raising the cost of living. That's the point of QE: to put more money in circulation so that prices rise. Then people will get less for their earnings and savings... and be more eager to spend now, rather than saving for later (rightly fearing that their dollars will lose value over time).

And that's why Krugman prefers to think of an economy as a machine. Machines can be manipulated and controlled. Real economies can't."